Unemployment falls but public sector jobs hit nine-year low

Ministers said the drop reflected a deliberate policy shift to promote private sector employment, which increased by 205,000

Employment minister Chris Grayling said he remained cautious given 'the continuing economic challenges' the government faced, but planned to stick with reductions in public sector jobs. Photograph: Dave Thompson/PA

Wednesday 20 June 2012 13.31 EDT
First published on Wednesday 20 June 2012 13.31 EDT

Public sector employment dropped to its lowest level in nine years in April as the government pushed ahead with its plans to reduce the size of the public pay bill.

The number of public sector jobs fell by 39,000 between February and April to 5.9 million, the lowest total since March 2003, according to the Office for National Statistics.

Ministers said the drop reflected a deliberate policy shift to promote private sector employment, which increased by 205,000, the second-strongest three-month figure in 13 years. The strong rise, led by a surge in manufacturing jobs in the West Midlands, meant the jobless total dropped 51,000 to 2.61 million and the unemployment rate remained unchanged at 8.2%.

Ministers were cheered by the number of people gaining full-time jobs after a run of figures showing most people reluctantly accepting part-time work. The employment rate increased by 166,000 to almost 29.28 million with the increase evenly spread between 82,000 taking full-time jobs and 83,000 taking part-time jobs.

However, economists said the jobs figures were a lagging indicator and tended to reflect the mood of employers at least six months ago.

The eurozone crisis, which has accelerated in the first half of the year, and the UK's return to recession, have undermined business confidence and sent shoppers scurrying from the high street.

"The latest labour market data point to near-record hiring in the first quarter, but also suggest that the health of the job market has since deteriorated slightly, adding to hopes that the Bank of England will inject further stimulus to help boost growth," he said.

Employment minister Chris Grayling said he remained cautious given "the continuing economic challenges" the government faced, but planned to stick with reductions in public sector jobs.

"These figures show that with the right support in place, it is possible for the private sector to create jobs while the public sector employment is falling."

The number of people claiming jobseeker's allowance in May rose by 8,100 to 1.6 million, ending two months of declines and adding to concerns that the government faces rising unemployment costs later this year. People unemployed for more than a year increased by 85,000 to 886,000, while the number of people unemployed for more than two years rose by 29,000 to 434,000. Unemployment among the young remained above 1 million.

The bigger than expected rise in full-time employment made only a small dent in the proportion of people wanting better paid work. The ONS said almost 8 million people are now in a part-time job, while those working part time because they cannot find full-time work increased by 25,000 to 1.4 million.

Self-employment has also surged during the recession, reaching a record figure of 4.17 million, up by 84,000 since the previous quarter.

Public sector unions said they were incensed by the cuts which had not only put record numbers of people out of work during the last two years, but eaten into the living standards of staff who remained in a job.

Average earnings increased by 2.1% in the year to April, less than the 2.8% rise in inflation.

Unison general secretary Dave Prentis warned that a backlash against the government's public sector pay freeze is set to "explode" and could lead to a fresh bout of strikes.

Paul Kenny, GMB general secretary, said: "Unemployment of 2.61 million five years into recession is unacceptable, unnecessary and an unforgivable waste of human talents.

Prentis said he was determined to "smash" the coalition's policy of freezing the wages of council, health and other workers, followed by two years of pegging rises to 1%.

In a speech to the union's annual conference he said industrial action will be taken if necessary to fight the squeeze on pay, adding that a demonstration planned in London for 20 October will be the biggest ever held.

"We are putting the government on notice. Our demand is for decent pay. If we cannot win through negotiation we will fight to win it through strike action. We will smash the pay freeze.

"Putting pay on ice has been devastating for public sector workers and their families. It cannot go on and we will not let it go on. They are scared of spending in shops and businesses and this is not only misery for families but also condemns our chances of economic recovery to the dustbin."